Understanding the risks of being a Guarantor under a Commercial Lease

Are you considering acting as a Guarantor under a Commercial Lease?  If so, it is important that you consider the risks involved before agreeing to what could be a potentially onerous position.

The main commitment to be aware of is that you are undertaking to comply with the Tenant’s contractual obligations under the Lease.  These include rent payments, which can include service charge and insurance rent, along with liability for any Tenant covenants such as putting the Property into a specified state of repair and condition.

It is crucial to ask yourself if you can afford these extra financial burdens if the Tenant finds itself in a position where it is unable to comply.  Have you considered the Tenant’s financial position and whether you trust its business capabilities?

In addition, have you fully reviewed and considered the Lease in detail?  Remember, you could end up being in the position where you are contracted to take on the Lease yourself and all its obligations.  It may be that you want to renegotiate some terms in order to protect yourself in the future.  For example, it would be more attractive if there were adequate alienation and termination clauses.

There are many other issues and risks to consider and to ensure that you are in the best position it is highly recommendable to seek professional legal advice at the outset.  What seems like a non-committal position now may seriously dampen your own future plans further down the line.

For advice and assistance please contact Adam Bromley in the Commercial Property Department by telephone on 0800 689 3206 or via our Contact Form.

Laura Bradley

About Laura Bradley

Laura Bradley is a Solicitor in the Commercial Property department at Forbes Solicitors. Within her blogs Laura deals with all aspects of commercial property including leases (from both landlord and tenant perspective), licences, acquisitions and disposals along with recent updates within the property sector.
This entry was posted in Commercial Property.